Is available money in a Home Equity Line of Credit considered Settlement Offer

[bd420]

What is the name of your state?
MI

Is available money in a Home Equity Line of Credit (HELOC) considered a Settlement Offer option? Both our names are on the loan, a check for about 14k, which was the remaining balance left on this lien has been put into an escrow withholding fune with her atty so that neither of us can touch it.

I term this 14k as 'potential debt', is that the wrong way to look at? To me, this money is debt waiting to happen, if it's NOT used, no interest is paid on it, if it IS used, it's, in my mind, similar to a credit card, in that there is now debt that need to be repaid.

Alternatively, I can offer a QDRO in the form of my largest ASSET, my retirement, to my stbx.

Any thoughts on how this is determined, and how a judge may decide what funds are used?

No one can give me a straight answer on this one, please help, a prize awaits, lol.

Tx,

bc

 

[LdiJ]

What is the name of your state?
MI

Is available money in a Home Equity Line of Credit (HELOC) considered a Settlement Offer option? Both our names are on the loan, a check for about 14k, which was the remaining balance left on this lien has been put into an escrow withholding fune with her atty so that neither of us can touch it.

I term this 14k as 'potential debt', is that the wrong way to look at? To me, this money is debt waiting to happen, if it's NOT used, no interest is paid on it, if it IS used, it's, in my mind, similar to a credit card, in that there is now debt that need to be repaid.

Alternatively, I can offer a QDRO in the form of my largest ASSET, my retirement, to my stbx.

Any thoughts on how this is determined, and how a judge may decide what funds are used?

No one can give me a straight answer on this one, please help, a prize awaits, lol.

Tx,

bc

If you are required to offer a settlement to the other party, and you don't have liquid assets available, then you will have to come up with the cash one way or another, without cost to the other party.

Traditionally, that is most frequently done via refinancing the home and cashing in enough equity to pay the settlement. Whoever is keeping the home will have to refinance anyway, in order to remove the others party's name from the mortgage/home equity loans.

I can't see anyone accepting a QDRO on a retirement account in lieu of a property settlement....because of the significant tax implications. I can see it being excepted for the portion of the settlement that is specifically related to the retirement funds...but not for the entire settlement.

 

[bd420]

OK, thanks, I finally have my answer

We both sign and cash the check, I pay her the amount she is required in full, and whatever is left, I can hopefully pay a CC off with, but at any rate, thanks for the answer, it came down to 'liquid' assets vs non-liquid assets, which is what a retirement plan is.

Thanks,

bd

 

[nextwife]

A curent HELOC would not be an appropriate way to settle out equity, as it exchanges cash to the recipient for indebtedness by the same recipient. They are simply lending themselves money, if their name is on the HELOC. A HELOC, if new, with only one borrower and in conjunction with a QUIT claim may be an ok way to pull out equity funds. But NOT if the other party is one of the "borrowers" on the HELOC being used!

 

[LdiJ]

A curent HELOC would not be an appropriate way to settle out equity, as it exchanges cash to the recipient for indebtedness by the same recipient. They are simply lending themselves money, if their name is on the HELOC. A HELOC, if new, with only one borrower and in conjunction with a QUIT claim may be an ok way to pull out equity funds. But NOT if the other party is one of the "borrowers" on the HELOC being used!

I agree...and said something similar (about refinancing) but it obviously didn't "take".

The party keeping the home MUST refinance all mortgage indebtedness (including HELOC) into their own name. If this is not possible then selling the home and splitting the proceeds is the logical answer.

 

[bd420]

sorry, I missed your assertion that the stbx...

sorry, I missed your assertion that the stbx... Is no longer on the mortgage, 2nd lien, etc.

The Refinance was done in my name, but my stbx remained on the deed and dowry (sp) rights, etc. Therefore, her name is on the check, she simply didn't want to sign off on the house as of yet.

So, at this point, if the HELOC can't be used, a judge would more likely rule to sell the house instead of a distribution of my retirement to my stbx?

Tx.

 

[LdiJ]

sorry, I missed your assertion that the stbx... Is no longer on the mortgage, 2nd lien, etc.

The Refinance was done in my name, but my stbx remained on the deed and dowry (sp) rights, etc. Therefore, her name is on the check, she simply didn't want to sign off on the house as of yet.

So, at this point, if the HELOC can't be used, a judge would more likely rule to sell the house instead of a distribution of my retirement to my stbx?

Tx.

If the home equity loan and the mortgage are in your name only..if you are soley responsible for the debt, then using the HELOC would be the appropriate way to pay her the settlement. It is NOT appropriate if she has any legal liability whatsoever for the debt.

Using a distribution from your retirement account would only be appropriate if you took a cash distribution from the account, in your name only, paid her, and took full responsibility on your tax return for all taxes and penalties. A QDRO would NOT be appropriate because that would put the tax burden on her.

You have to give her the settlement money free and clear of any debt or tax liability to her. If you can't or won't do that, then yes, the judge would be likely to order that the home be sold and the proceeds split.

 

[bd420]

I thought I saw where she had signed off, however

I thought I saw where she had signed off, however could this be the case if HER Name is also on the HELOC remaining balance check that was written out? Or do neither of these 2 things have necessarily anything in common? Just seems a bit odd to me, still covering all my bases, lol, thanks so much, you are very insightful.